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GREATER BENDIGO INDOOR AQUATIC AND WELLBEING CENTRE Summary of analysis of proposed business operations At a forthcoming meeting, Council will be considering a final report that will include a summary of the many and varied features and milestones achieved to date regarding the development of the proposed Greater Bendigo Indoor Aquatic and Wellbeing Centre in Kangaroo Flat. The conception, planning, design and fund-raising efforts associated with this major project have been many years in the making. Features of the report will include summaries of: • The Greater Bendigo Aquatic Strategy and emerging leisure trends • Site identification and early planning • Public consultation and Community Reference Group • Project Delivery Group • Project Brief • Status and use of the existing Hall at Browning Street • Planning approvals • Public and Council advocacy • Project cost and development options • Project funding sources and Council’s contribution • Facility management options • Business analysis of operations • Financial implications and project affordability • Alternative siting options and implications if Council decided to retain the existing hall

on Browning Street The report will provide Council with two substantive aquatic centre development options - Option One incorporates a 51.5m pool (inclusive of a 1.5m moveable pool divider) whilst Option Two incorporates a 25m pool. All other features of the proposed complex (e.g. children’s pool, hydrotherapy pool, gym, program rooms, café etc.) are incorporated into both options, i.e. the only substantive difference between the two options is the length of the main centrepiece swimming pool. In advance of the release of that report, Council has requested the public release of information concerning the analysis of proposed business operations for the Centre as they relate to the two main alternative development options. A related matter is also recalling adopted Council policy considerations regarding the development of public aquatic facilities across the municipality generally.

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Greater Bendigo Aquatic Strategy and emerging trends At its meeting held on 1 December 2010, Council adopted a strategy and suite of recommendations as part of a municipal-wide Aquatic Strategy intended to achieve a more desirable and sustainable mix of aquatic facilities across Greater Bendigo. Preceding the adoption of the Aquatic Strategy was also a range of detailed reports presented to Council including: • Technical Assessment of Swimming Pools – R.J.Ball (2009) • Operational Assessment of Pools - Coomes Consulting (2009) • Indoor Aquatic Centre Initial Feasibility - Garry Henshall and Assoc. (2010)

The initial Aquatic Strategy was prepared by Garry Henshall and Associates in association with various specialist sub-consultants and Council’s Recreation Unit. The Aquatic Strategy was subsequently reviewed by specialist aquatic facilities advisor Mike King of SGL Consulting, the objective being to review whether the strategy provided a solid enough base from which to shape and guide meeting the future aquatic facilities needs of our fast growing and diversifying community. In summary, the Aquatic Strategy incorporated the following major policy positions: • That many of Greater Bendigo's aquatic facilities are over 40-50 years old and in most

instances require modernisation or closure; • The development of fewer but better facilities that meet contemporary community

demands and expectations;

• Development of a quality mixed-use indoor aquatic leisure centre at Kangaroo Flat to serve the southern parts of Bendigo and the broader Bendigo region (note: initially recommended to be a complex comprising a 25m swimming pool);

• Eventual closure of low-use aged outdoor seasonal pools at Kangaroo Flat, Golden

Square and Long Gully in parallel with the development of the new indoor centre;

• Construction of a water splash/play park at Long Gully (note: since achieved); • Upgrade of the Peter Krenz Leisure Centre at Eaglehawk over the next ten years; • Development in due course of an Aquatic Splash/Play Park/Lagoon at White Hills

(Botanical Gardens) to replace the existing aged White Hills Pool; • Consider a potential partnership with La Trobe University to redevelop and expand

the University Sports Centre with a focus upon education, training and rehabilitation and supporting high level sport;

• In due course reassess the need for additional aquatic leisure facilities to support the eastern parts of Bendigo, particularly along the Strathfieldsaye growth corridor;

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• Improve existing aquatic leisure opportunities available to the Greater Bendigo community by, for instance, extending the operating season of the Bendigo East Pool (since achieved) and investigate options to improve outdoor dive facilities at the Bendigo Aquatic Centre;

• Continue operating seasonal outdoor swimming pools in Raywood, Elmore, Goornong, Heathcote and Marong despite their relative low usage and high cost given the importance these heavily subsidised facilities play in our small and relatively remote communities.

The graphic representation on the following page provides a stylised snapshot summary of the adopted Aquatic Strategy. A review of the Aquatic Strategy concluded that the strategy’s recommendations were well justified and consistent with contemporary aquatic leisure facility trends. The high number of aged and seasonal outdoor pools in Greater Bendigo reflects a typical 1960s-1970s local neighbourhood provision model where most people traditionally recreated locally and mainly swam only in the hot months of the year. They were also developed in an era of relative less transport mobility, and far less leisure and recreation options than what exists today. With the increasing introduction of indoor aquatic facilities across Victoria in the last twenty or so years, people are now able to make use of swimming facilities all year round. People have become used to travelling further distances than their local neighbourhood for such facilities. The ongoing reduction in usage of most of the single outdoor swimming pool facilities validates this trend and justifies Council considering investing in far more cost effective facility provision to attract more people more often to the mix of uses typically within indoor aquatic facilities. A review by Mike King of SGL Consulting of the components of the proposed Indoor Aquatic Centre at Kangaroo Flat concluded that it should be designed to attract a broad range of user markets across the entire community. The Aquatic Strategy emphasised that general leisure trends currently impacting on aquatic leisure facility design, composition and use include: • A gradual ageing of the population - as life expectancy increases, birth rates stay low

and the “baby boomers” of the 1950s and 1960s grow older. This is placing a new demand on providing programmed hotter water areas as well as pools suitable for older adult exercises and therapy. It also means it is essential to have a range of pools with different water depths and temperatures;

• Flexibility in the times people recreate – as demands on people’s time increases and

work practices change people are seeking to take their recreation at different times, over a broad spread of hours and at facilities that offer a lot of activities under the one roof. Indoor pools and health and fitness facilities are particularly attractive and getting easier to use as many are open 12 to 16 hours, 7 days a week;

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• Increased variety in recreation and leisure options - people’s leisure and recreation

options are changing towards newer more varied activities offered over a greater range of timeframes compared to previous decades where limited variety in activities and scheduling occurred. This has supported the trend to more multi-use facilities to attract a broader range of users as well as multiple water areas to meet different needs at the one centre, and to compete for use with other facilities;

• Constraints to recreation and leisure participation - lack of time, lack of facilities close

by, family and work constraints, health problems and cost of service or use of facilities are the main constraints to many people’s recreation and leisure participation. The development of targeted markets of users, programs and services at aquatic and health and fitness centres has assisted in reducing some of these participation constraints;

• Changing employment structures, trading and work hours - these trends often make

participation in traditional sports difficult and therefore people are looking for facilities that are open longer hours and have a lot of activity options at the one site. This makes opportunities such as indoor pools attractive as their long opening hours and days open means usage can be made in a wide range of social, training, competition, educational settings.

• Different people want different activities - the broadening different cultural, age, gender

of the population sees the need for facilities to offer potential users a much more varied range of programs and services than previously offered. All year round indoor aquatic facilities also provide the greatest diversity of activities throughout the different seasons impacted by an areas local weather;

• Provision of high standards and quality of facilities and services - people are

increasingly looking for high standard, high quality facilities and services to meet their recreation and leisure needs. This has also seen the trend for indoor facilities becoming very popular as they allow activity in safe and secure spaces in all weather and environmental conditions. This leads to indicating that building low standard, low cost facilities will not attract the maximum user market;

• Desire for activities to be affordable - the development of multi-purpose aquatic leisure

centres has enabled the high operating cost activity of aquatics in many cases to be cross-subsidised by more profitable activity areas such as health and fitness, food and beverage and entertainment areas. This has enabled many facilities to keep general entry fees low to encourage use whilst seeking users who want special services to contribute at a greater level to the cost of such activities;

• Recognition of strong links between physical activity and health - preventative health

care and active lifestyles are very important to many peoples aquatic and health and fitness activities are becoming a large part of people’s activity choices; and

• Expectations of equity and access - today’s society expects people with special needs

to be catered for in public aquatic and leisure facilities. This has seen improved design features to increase accessibility to and within such facilities. Added to this is the growing array of programs and activities offered to people of all different abilities, physical condition and skill levels.

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A modern indoor aquatic leisure centre should desirably aim to offer facilities for all ages, interests and abilities and the proposed components will meet the majority of the main user markets as listed below and as summarised in the table on the following page:

• Recreation and Leisure Market – usually made up of families, people coming with

friends and groups for fun, relaxation, social activity and low level competition / participation;

• Competitive/Training/Fitness Market – usually made up of people predominantly attending facilities alone for structured fitness or competition activities;

• Education Market – usually made up of children and adults wishing to increase water safety and survival skills. Includes learn to swim classes, school and club use and individuals improving their skills and techniques. They require hot water pools and water depths with some straight edges and easy water access etc.;

• Health and Therapy Market – usually made up of children, adults and older adults wanting to relax play or exercise in hot water. This market also includes specialist health condition groups such as arthritis, asthma sufferers, etc. They require hot water pools and associated health relaxation areas, i.e. spa/saunas.

Main Aquatic User Markets

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Leisure industry research indicates that the recreation and leisure market is typically the largest sub-category as it contains people of all ages, ability, types, interest and gender. The competitive/training/fitness market is a more specialist market as it usually contains younger, fitter and more active people who make time to train and compete. Research conducted by SGL into the Australasian recreation and leisure markets indicates that in many cases 60% - 70% of facility users come from the recreation/leisure sector with 20% - 30% coming from the competitive/training/fitness markets. The health and therapy and education markets can range from 10% - 20% of the market depending on the age and health profile of the community in which the facility is located. The most successful aquatic centres attract all user markets and should be set up to allow people to participate in a range of activities at the one site. The further addition of health and fitness facilities, spas and saunas and social areas have been very successful at many aquatic facilities, as they add to the overall user experience and contribute to people being attracted to attend these facilities more often. To achieve economic viability and a multi-use design, other facility components should desirably include: • Gymnasium • Studio room for group classes or community groups • Spa / sauna • Health and Wellbeing suites • Café with access from “wet” and “dry” spaces. An environmentally responsible design should be a high priority considering elements such as double glazing windows and doors to reduce heat loss and allowance of natural light. Indoor facilities should also have a strong relationship to the outdoor environment with windows / doors allowing access and sightlines to open space. Project cost and alternative development options The proposed development involves the design and construction of a new multi-purpose Indoor Aquatic and Wellness Centre. Proposed works also include external perimeter landscaping, demolition of the existing Browning Street Hall, construction of a new car park, pedestrian walkways and precinct signage. Concept plans of the two development options are included on the following pages.

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Option One - Ground level - Inclusion of 51.5 metre pool

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Option One - Second level

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Option Two - Ground level inclusion of 25 metre pool

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Option Two - Second level

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Our Cost Plan provides estimates of likely construction costs for the designs as approved by Council. The indicative Cost Plan prepared by Quantity Surveyors Turner and Townsend is detailed in nature but can be summarised as follows: Option One – incorporating a 51.5m swimming pool (with moveable “boom”) Building works $ 12,970,326 Aquatic works $ 7,215,000 External works and services $ 2,051,867 Preliminaries, design contingency , other $ 2,152,807

Base construction sub-total $ 24,390,000

Construction contingency $ 1,220,000 Professional fees $ 1,900,000 Furniture, fittings, equipment, signage $ 390,000 Electricity sub-station construction allowance $ 100,000 Assumed cost escalation (beyond Jan 2015) $ 2,000,000 TOTAL $ 30,000,000 (note: cost estimates as at January 2015) Estimates are based on the plans incorporating the following spatial distribution: Ground floor area 4,793 sq.m First floor area 1,107 sq.m Gross floor area (exc. balcony) 5,900 sq.m Construction cost per sq.m. (ex. GST) 4,134 sq.m Assumed costs exclusions include: • Any significant latent conditions • Fit-out of Café by operator • Fit-out of Wellness Centre by operator • Fit-out of Gym by operator • Any unforseen major upgrade of existing service infrastructure to the site • ESD initiatives beyond minimum Building Code compliance

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Option Two – incorporating 25m swimming pool Building works $ 12,117,136 Aquatic works $ 4,915,000 External works and services $ 2,046,539 Preliminaries, design contingency, other $ 1,846,325 Base construction sub-total $20,925,000

Construction contingency $ 1,050,000 Professional fees $ 1,900,000 Furniture, fittings, equipment, signage $ 370,000 Electricity sub-station construction allowance $ 100,000 Assumed cost escalation (beyond Jan 2015) $ 1,800,000 TOTAL $ 26,145,000 (note: cost estimates as at January 2015) Facility Management Options Working with aquatic facilities advisor Mike King of SGL Consulting, last year we undertook a review of facility management and staffing options for the proposed Centre. Plausible management options ranged from: • Internal Management (i.e. direct Council staffing and management); • Contract Management ( i.e. external specialist company operated); and • Council Company Limited by Guarantee (i.e. an entity owned by Council). Following a review of management options and initial discussions with Councillors last year, it was decided that our project planning and business operations analysis should assume implementation of a contract management model. Reasons for this included: • The desirability of reducing Council’s capital contribution for the project through a

potential off-setting collaborative private/not-for-profit entity financial contribution in return for a medium-to-long term contract management entitlement; and

• The likelihood that a specialist operator would be in a better position to operate the facility at a lower net cost to the community than if Council was to otherwise operate it given typically its higher cost structures.

An indicative staffing structure for a contractor operated facility such as that proposed would typically include the following key personnel: • Centre Manager • Aquatics Manager • Health and Fitness Coordinator • Operations Coordinator • Wellness Centre Coordinator • General and casual staff (full-time, part-time and casual)

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Business Analysis of Aquatic Centre Operations In 2011 and 2012 the (then) Council considered the projected operational financial performance of the proposed Centre based on the designs it was considering at that time. A summary of analysis was summarised in a public report to Council on 8 February 2012. Incorporating a variety of conservatively applied assumptions, it was (then) projected that the operational annual net cost of the 25-metre pool option to be $261,641 in Year One with operational profit being achieved in or around Year Five of operations. The analysis forecast that the 51.5-metre pool option had a Year One net annual cost of $378,131 with an operational cash profit being achieved in or around Year Eight. Designs have however been refined and modestly down-sized since then and business and financial models for the proposed facility have accordingly been revised by Mike King of SGL Consulting in association with our project team. Successive business and financial models for the proposed Centre have been prepared and presented to current Councillors on several occasions in Council Forum meetings in 2014. In modelling likely revenue and expenditure streams for the proposed facility over ten years, it has been assumed that the Centre will serve a regional population catchment of over 100,000 people. The analysis has also been undertaken on the basis that the proposed Centre will be operated under a contract management model. The analysis therefore incorporates a fair and reasonable annual contract management fee from Council and assumes projected salaries and fees and charges that are typically being used across Victoria by the major leisure centre contract management entities that successfully operate in Victoria. The contract management model has been determined as the preferred operating model given its typical operating efficiencies, outsourced operational expertise and the prospect of attracting some degree of collaborative capital financial contribution towards the physical development of the facility in return for long-term management rights. The key business assumptions included in the ten-year business plan for the proposed Centre are as follows: Business Model Areas COMPONENT 51.5m pool –

Option One 25m pool – Option Two

Indoor Aquatics/Plant 3,785 m2 3,169 m2 Dry/Wet Change 319 m2 319 m2 Indoor Health and Fitness 859 m2 861 m2 Wellness Areas 131 m2 135 m2 Café/Retail/Reception 410 m2 443 m2 Multi-purpose Room 100 m2 163 m2 Entry/Lifts/Stairs/Circulation 296 m2 260 m2 TOTAL INDOOR ACTIVITY AREA

5,900 m2

5,350 m2

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Added to the indoor building area are also outdoor-grassed areas and hardstand areas of about 1,000 m2. The main activity areas include: Indoor Pools: Option One - 51.5m x 8 lane pool or Option Two - 25 m x 8 lane pool

Leisure pool with learn to swim pool and separate toddlers pool, splash pad and water play unit, Warm-water program pool Spa pools (2) and sauna (1)

Outdoor Area: Grass and sun-shade areas off main pool hall Health and Fitness: Upstairs weights and gym area and three multi-purpose

activity rooms Wellness Centre: Indoor wellness and health services activity and 5

consulting rooms Front of House: Café, lounge and retail merchandise sales area Shared Change: Ground floor shared change areas and amenities Car Parking: Public parking area and separate staff and group entry

(bus) parking Management and staffing model A management and staffing options review paper was completed by SGL in September 2014. This review presented a range of management models that may suit the new facility. Following a review of the management options it was confirmed by the Project Team that the business analysis plan should assume a contractor management model. For the purpose of modelling likely costs and revenue streams, a standard staffing structure was developed and is included in the more detailed business analysis provided to Councillors. Business Assumptions Operating hours - The base case financial modelling assumes the following core business hours for management and staff rosters: Monday to Friday 6am to 9pm Saturdays/Sundays 6am to 7pm Entry Fees - The following table reflects the entry fees assumed in the base case financial model with the first year of entry programmed for 2017. Assumed Facility Year 1 Entry Fees (2017)

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Activity Area Entry Fee Indoor Pools Casual

Adult casual

$ 6.50

Child/Concession casual $ 4.50 Family (2 adults/2 children) $ 18.00 Lane hire – Discount $ 12.00 Group entry $ 4.00 School entry $ 3.50 Swim/Spa/Sauna $ 10.00 Adult 5 visits $ 26.00 Adult 10 visits $ 52.00 Child/Concession 5 visits $ 18.00 Child/Concession 10 visits $ 36.00 Family 5 visits $ 72.00 Family 10 visits $144.00 Aquatic Events Indoor 50m Peak time ($150/hr x 4 hrs) $650.00 Indoor 50m Off peak ($100/hr x 3 hrs) $300.00 Aquatic Programs Learn to swim class $ 14.00 Aquarobics class $ 12.00 Water exercise class $ 12.00 Birthday parties (per child + food) $ 20.00 Aquatic Membership Joining Fee $ 40.00 Monthly membership $ 40.00 Weights Area Adult Casual $ 16.00 Concession casual $ 13.00 Personal training $ 45.00 Membership joining fee $ 45.00 Members monthly fee $ 55.00 Health and Fitness Dry programmes $8.00-$15.00 Membership joining fee $ 40.00 Members monthly fee $ 55.00 General Memberships Membership joining fee $ 45.00 Platinum members monthly fee $ 80.00 Gold members monthly fee $ 65.00 Wellness Centre Massage $65.00-$80.00 Spa packages (2 to 3 hours) $150 to $250 Pedicure/Manicure $40 to $50 Bathing and Beauty Treatment $40 to $110

Management/Staffing and Salary Rates A base management and staffing structure has been assumed for the Centre and includes new indoor facilities management staff. All staff salaries used in the model is based on likely pay rates by contract management operators and their typical salary rates across Victoria.

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Financial Model Global Impacts The base case financial model has included the following global impacts across the 10-year business model based on all components being open in 2017 as the first full year of business. Special one-off start-up costs and pre-opening allowances are not included in this base case model. These would need to be funded from the project budget or other sources before the Centre was completed and operational. The main business impact assumptions include: • CPI Increases: Assumes an average of 2.3% Year 2 to Year 10;

• Alternative Expense Adjustment: Assumes energy costs and maintenance increases

by 2.5% annually (i.e. slightly higher than CPI);

• Business Growth: Assumes Year 3 is Base Year at 100% and Year 2 is discounted by 5% to 95% of Year 3 and Year 1 is discounted by 10% to 90% of Year 3. Business growth Year 4 101%, Year 5 102%, Year 6 103%, Year 7 104%, Year 8 105%, Year 9 106% and Year 10 106%;

• Retail Price Growth: Assumes 1% price increases from Year 2 to Year 10;

• Expenditure Increases: Assumes annual expenditure increase of C.P.I.;

• Salary on-Costs: Assumes annual on-costs of 25% on all staff and instructor salaries;

• Annual Salary Increases: Allows for annual increases of 1.2% above C.P.I. (to reflect

recent industry EB increases);

• Contract Management Fee: Included but not disclosed at this stage to ensure appropriate competitive tension in any tender process;

• Asset Management and Replacement Allowances: No allowances for asset management and renewals have been included in the 10 Year operating projections. It would be reasonable to assume however that this would need to set at about $100,000 per annum;

• Depreciation or Loan Repayments: No allowances for annual accounting depreciation or any loan repayments are included in the operations model. Depreciation would however need to be factored into Council’s annual budgeting structure. Given the modern nature of a newly built facility, it would be reasonable to assume minimal capital works would be necessary for the first ten or so years of operations, although a rolling program of scheduled maintenance and monitoring would be necessary. Depending on the assumed life of the building, it would be reasonable to assume a non-cash depreciation accounting provision of approximately $300,000 per annum.

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Usage Projections: The following key assumptions are included in the Base Case 10 Year operations business model: • Average visitations will be based on 6 to 8 visits per head of population in the primary

catchment zone (45,000 people) and 3 to 4 visits in the secondary catchment zone (30,000);

• This would see after a business establishment period of 2 to 3 years a 420,000 to 470,000 annual visitation/visits for the facility;

• Projected centre usage in the model is broken up into casual, program and

membership uses; and • Usage growth is based on global inputs of demand with allowances for initial new

business slow establishment and then accelerated business consolidation. By way of comparison, the Peter Krenz Leisure Centre in Eaglehawk operated by the YMCA is understood to attract an annual visitation of some 350,000 per annum. Given the relatively limited and aged nature and less-central position of this Centre relative to that proposed at Kangaroo Flat, it is considered that the assumed annual visitation of at least 420,000 for the proposed new facility is conservative and likely to be achieved. Base Case 10-Year Financial Model and Performance Summaries A ten-year financial model has been developed for both (51.5m v. 25m) aquatic facility options. These have been developed based on an assumed opening year of 2017. The analysis incorporates fair and reasonable assumptions around usage, revenue, expenditure and net operating results. Centre overheads cover centre management and services across the facility and these have been modelled by apportioning back to relevant activity areas. The detailed ten-year business performance summaries for both facility options have been detailed and provided previously and separately to Councillors. In summary, it is projected that the proposed Centre, inclusive of a 51.5 metre swimming pool, would financially operate as follows:

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Option One – 51.5m centrepiece pool Year Income ($) Expenditure ($) Projected surplus/ (loss)($) 2017 4,451,031 4,792,861 (341,829) 2018 4,698,922 4,960,532 (261,610) 2019 5,062,698 5,205,228 (142,530) Base Year 2020 5,223,498 5,362,338 (138,839) 2021 5,443,366 5,605,967 (162,601) 2022 5,672,000 5,811,881 (139,881) 2023 5,909,739 6,079,999 (170,259) 2024 6,156,936 6,322,217 (165,281) 2025 6,413,955 6,565,698 (151,743) 2026 6,618,145 6,780,667 (162,255) In summary, it is projected that the proposed Centre, inclusive of a 25m swimming pool would financially operate as follows: Option Two – 25m centrepiece pool Year Income ($) Expenditure ($) Projected surplus/(loss)($) 2017 4,280,731 4,533,562 (252,831) 2018 4,519,602 4,682,204 (172,602) 2019 4,870,107 4,926,873 ( 56,766) Base Year 2020 5,024,926 5,075,013 ( 50,088) 2021 5,236,574 5,309,017 ( 72,442) 2022 5,456,667 5,504,980 ( 48,313) 2023 5,685,530 5,762,813 ( 77,283) 2024 5,923,503 5,994,401 ( 70,898) 2025 6,170,939 6,226,893 ( 55,955) 2026 6,367,554 6,430,911 ( 63,356) The operational performance for both aquatic centre options covers all daily business usage, income and general expenditure. The financial models do not include pre-opening start-up costs, any leasing of furniture, fittings and gym equipment (assumed to be borne by the future operator) or asset renewal funding. The ten year review for both aquatic options indicates the business is expected to record modest annual operating deficits that are highest in the first two to three years as usage, membership and programs are establishing. The operating deficits then gradually reduce as the business consolidates. The annual operating deficit result is directly impacted by the relatively higher cost to operate the 51.5 metre pool which requires more significant supervision, energy for heating of water and air and maintenance allowance for this large water body and building structure. The net operating (and average) deficits for the 10 years for each aquatic facility option are as follows:

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• 51.5m pool option - combined 10 Year Operating Deficit = $1,837,196 (average $183,710 deficit per year)

• 25m pool option - combined 10 Year Operating Deficit = $920,534 (average $92,053 deficit per year)

The business analysis indicates the provision of a 51.5m pool will see the annual operating deficit double to the 25m facility option over the first 10 years of operation. The 51.5m pool option would cater for more users however with a combined 10 year visitation/visits rate of 4,544,000 visits compared to the 25m pool option of 4,286,000 visits. To help reduce the high cost of the public aquatics area in both pool options there are a number of relatively more profitable activities included in the financial model including: • Wellness Centre: predicted to generate operating surpluses of between $176,000 by

Year 3 to $200,000 by Year 10; • Gym and Health and Fitness Programs: predicted to generate surpluses of $43,000

by Year 3 to $118,000 by Year 10; • Café and Retail Areas: predicted to generate surpluses of $169,000 by Year 3 to

$207,000 by Year 10. It is therefore essential that these relatively profitable activity areas be retained and ensure they are operated to maximum efficiency to ensure the operating surpluses can cover some of the higher increasing operating costs of the overall centre. The 10 Year Base Case financial model has been used to complete sensitivity analysis if the projected usage was either less or greater than predicted in the base case. To assist in this process we have developed two alternative financial models being: • Extra Conservative Case: 10% less use than the Base Case

• Optimistic Case: 10% more use than the Base Case The annual business result for each case for each pool option is compared to the Base Case and has been provided to Councillors. Aquatic Facilities Closure Cost Savings In line with the adoption of Council's Aquatic Strategy it was generally agreed at the time that the new indoor complex proposed at Kangaroo Flat would meet future aquatic facility needs for a large portion of Greater Bendigo's current and future population and allow for closure of a number of low-usage aged relative high unit cost outdoor swimming facilities in the immediate vicinity. These were identified at the time as the Golden Square, Long Gully and Kangaroo Flat outdoor swimming pools. When comparing the projected operating performance of the new facility it should be noted that Council has been meeting annual costs of approximately $200,000 per annum for these aged low-use outdoor pools.

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The cost of operating the existing outdated outdoor pools in Kangaroo Flat, Golden Square and Long Gully (before it closed in 2013) is broadly comparable to the projected operating cost of the proposed multi-facet indoor centre, despite their usage being only a small fraction of the projected usage of the proposed new indoor centre. It is important to note however that the Council and relevant community group will have the option to retain and continue to operate the Golden Square pool if they so choose. Stan Liacos Director – City Futures City of Greater Bendigo 11 May 2015